The government has rather low environmental expectations. In fact, the consultant found that they are about as lenient as the Mexican restrictions, though the Philippines presents no public relations nightmare as protestors are not rallying against health concerns, as they were in Mexico.
Although the conditions in the Philippines may seem even more ready for outsourcing then the conditions in Mexico, the ethical costs of operating the company in the country are once again too high. Like the situation in Mexico, workers in the Philippines may work for lower wages than workers in the United States, but owners are not being provided with the same level of skill that they would be if continuing to operate the factory in the United States. Because the factory workers would consist mainly of underfed adults and impoverished children, the company would be lucky if workers managed to produce sufficient amounts of products throughout the day. Additionally, employing workers for this cost allows the company once again to act as an enabler, allowing social injustice to continue in the world instead of working to stop it. In a country committed to economic reform in which the first stage of reforms has produced economic growth, enabling the country to continue to undervalue its workers would produce as much negative press as the health protests in Mexico. For both business and ethical reasons, therefore, outsourcing to the Philippines based on the low wages is not strategically supported.
This same argument can be applied to the lower ecological standards put in place by the country. As previously stated, though operating in conjunction with the United States more stringent ecological model may cost the company operational costs in the short run, failing to determine how to operate the company in a more ecological manner will cost the company far more in the long run, as competition that has succeeded in this task will lead the company in sales. Additionally, in the present era of focus on ecology and green living, outsourcing in order to avoid costs associated with a greener lifestyle does not yield a very solid reputation for the Electrocorp. For these reasons, though the Philippines have a relatively strong government and economy, outsourcing to this third world country is not advisable for both business and economic reasons.
In both Mexico and the Philippians, the benefits Electrocorps outsourcing were overshadowed by both ethical and business negatives. In both cases, the companys production costs would decrease in the short run because of the low wages it could pay its workers and the minimal government requirements in regards to the environment. In the long run, however, the company would fall behind its competitors, not only because of the innovations it would miss out on by avoiding the problem of environmental responsibility, but also because of the negative image the company would create by employing impoverished workers and enabling countries to continue the cycle of undervaluing its workers. Finally, in both countries, the companies would decrease operation costs but gain little, as impoverished and underage workers would not be as able to produce as able workers in the United States.
Though South Africa presents a case different from both the Philippines and Mexico, the argument for outsourcing to the country is, nevertheless, flawed. According to the companys consultant, South Africa does not present as favorable of an economic environment as the other two countries. With wages at $10 per day, the company would be saving money by moving to the continent, but not as significant an amount of money as it would be if it moved to either of the other areas. In addition, the consultant has studied the Union activities in the area and suggested that rates are likely to increase as unions bargain. Unions have also impacted the situation in another way. According to the consultant, both the unions and the government are attempting to better the environmental situation in South Africa, so environmental restrictions are heavier in the country than in the previous two nations, although still lower than the United States.
For these reasons, a move to South Africa would decrease the cost of production for Electrocorp, but the cost would not be as significant as it would in the other two countries, and with unions and the government on the move, the company must understand that outsourcing to the area could reap benefits now, but soon end up costing the corporation about the same amount as production cost in the United States. From a business perspective, therefore, outsourcing to South Africa is both risky and economically beneficial enough to warrant that risk.
Though the ethical argument against outsourcing to South Africa is the weakest of the three countries considered, the work of Jeanne Esslaar has contributed to the argument against an ethical outsourcing in the country. At first, outsourcing in the area might seem ethically legitimate. The wages in the country are significantly higher than in most developing economies, and unions are available to consult workers as to their rights. Both the government and unions have been working to increase those rights, especially when it comes to safety and the environment, and this work shows a step in the right direction for democracy and human rights. According to Esslaar, however, employees in South America still see outsourcing as derogatory and “socially suboptimal” (2002). According to Esselaar, who completed a study of outsourcing in South Africa, employees saw outsourcing as suboptimal because it decreases the availability of jobs and pay, allows employment conditions to suffer, and thwarts the power of Unions (Esselaar 2002). Just as the companys presence in the other two countries would have enabled them to continue to pay workers low wages and allow poor working conditions, so to do laborers in South Africa agree that the case is the same with them. When outsourcing does work, Esselaar argues, it is when workers are treated not as employees but as independent contractors, able to be in control of their own working environment (2002).
With minimum wage laws, governmental regulations, and unions as strong as they are, many companies are hoping to solve their business problems by outsourcing. Although many have looked down on outsourcing as a catalyst of lost jobs and deteriorating human rights conditions, free trade economists often argue that outsourcing is not only necessary, but also good. Through this case study, however, the reader has become painfully aware of the negatives of outsourcing for Electrocorp. In each country, the company would save money on production costs, but loose money and face when it comes to human rights. Though workers can be paid smaller sums in third world countries, those workers also produce less material, and by enabling them, companies that outsource suggest that paying low wages and having terrible working conditions is acceptable. The ethical questions brought up by outsourcing are answered by Esselaars article regarding outsourced employees feelings. In this case, staying in the United States would not only be a better decision, but also a more ethically sound one. Electrocorp in the United States may have to deal with raising production costs, but the firm has the opportunity to beat those costs by learning a new business technique on its own soil, not crossing ethical boundaries and outsourcing.
Esselaar, Jeanne. (2002). The Debate over Outsourcing in South Africa: Evidence from a case study. Proceedings from Development Policy Research Unit Conference 02. Muldersdrift, Johannesburg.
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